Social Security cuts are part of deficit plan

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WASHINGTON — Divisions remain within President Barack Obama's deficit commission on politically explosive budget cuts and slashes in Social Security benefits, even as the panel's co-chairmen go public with a revised plan to tame the runaway national debt.

The new plan by co-chairmen Erskine Bowles and Alan Simpson, to be unveiled Wednesday, faces an uphill slog. Resistance is certain, not only because of the idea of raising the Social Security retirement age, but also because of proposed cuts to Medicare, curtailment of tax breaks and a doubling of the federal tax on a gallon of gasoline.

Though the plan appears unlikely to win enough bipartisan support from the panel to be approved for a vote in Congress this year or next, Bowles has already declared victory, saying he and Simpson have at least succeeded in initiating an "adult conversation" in the country about the pain it will take to cut the deficit.

The plan faces opposition from many commission members. House Republicans appear uniformly against tax increases, while liberal Democrats like Jan Schakowsky of Illinois appear unlikely to be able to accept big cuts in federal programs for seniors.

Obama named the commission in hopes of bringing a deficit-fighting plan up for a vote in Congress this year, but it appears to be falling well short of the 14-vote bipartisan supermajority needed.

A new version of the plan, obtained by The Associated Press on Tuesday, makes mostly minor changes to a draft that whipped up enormous controversy when unveiled earlier this month. Some domestic spending cuts are modestly higher than previously proposed, and health care savings from overhauling the medical malpractice system would reap less than proposed earlier this month.

Unlike their original proposal, Bowles and Simpson stop short of calling for caps on medical malpractice awards. Instead they recommend changes in how awards are made.

But other proposals remain the same. Among them are a gradual increase in the Social Security retirement age to 68 by 2050 and 69 by 2075, using a less generous cost-of-living adjustment for the programs and increasing the cap on income subject to Social Security taxes.

The plan also retains a 15-cent-a-gallon increase on gasoline, a three-year freeze on federal worker pay and the elimination of 200,000 workers from the federal payroll through attrition.

The proposal obtained by the AP was a draft that was still undergoing changes Tuesday evening.

Other recommendations:

— Eliminate congressional pet spending projects known as "earmarks."

— Reduce the corporate income tax rate to 28 percent from 35 percent and stop taxing the overseas profits of U.S.-based multinational corporations.

— Overhaul individual income taxes and corporate taxes, giving Congress the choice of reducing the top rate to as low as 23 percent and no higher than 29 percent. The lower the rate, the fewer the tax credits and deductions that would be available to taxpayers.

Under one scenario proposed by Bowles and Simpson, taxpayers would face three tax brackets of 12 percent, 21 percent and 28 percent. Taxpayers would still be able to claim an earned income tax credit and child tax credit as well as all standard deductions and exemptions. Capital gains and dividends would be taxed at ordinary income tax rates. Taxpayers could claim a mortgage interest deduction up to $500,000, but only on their primary residence.

If Congress does not undertake a comprehensive overhaul of the tax system by 2013, the plan calls for a "fail-safe" provision that would trigger across-the-board reductions in tax breaks, designed to raise revenue by $80 billion in 2015 and $180 billion in 2020.

Bowles was White House chief of staff when former President Bill Clinton negotiated a balanced budget plan in 1997; Simpson is a former GOP senator from Wyoming.

Only Bowles and Simpson are guaranteed to support the plan when the panel votes. None of the 12 House members and senators named by Obama have committed to the proposals, though Bowles and Simpson could pick up support from nonelected deficit hawks like Democrat Alice Rivlin and Honeywell International's chief executive, David Cote, a Republican, who won't have to defend themselves to voters. Republican senators seem more likely to vote for the plan than their rigidly anti-tax increase House counterparts.

"I don't know if we're going to get two votes or five votes or 10 votes or 14 votes," Bowles told reporters. "There are enough reasons to vote 'no' in this plan for anybody to vote 'no.'"

A supermajority of 14 of the 18 panel members would have to approve recommendations for a possible vote in the lame-duck session of Congress. That seems out of reach, but Bowles says it's just as important to have jump-started a national debate on what it'll really take to bring the deficit under control.

"Our goal in this whole process has been really simple," Bowles said. "It's basically been to start an adult conversation here in Washington about the dangers of this debt and the deficits we are running."

He added, "The era of deficit denial in Washington is over."

Some lawmakers are already raising concerns about the plan, but North Carolina's senators are supportive.

“Today's report from the debt commission clearly underscores the need to rein in government spending. I am currently reviewing their recommendations, but from what I've seen so far, the Commission has put forth a serious proposal that will put us back on the road to fiscal sanity,” Sen. Richard Burr said Wednesday.

Sen. Kay Hagan agreed.

"Their work addresses a wide range of issues from tax expenditures to spending cuts, but most importantly, it keeps the process of addressing our country's fiscal situation moving forward,” she said. “I look forward to continuing to review their recommendations in the coming days, and I want to thank Erskine Bowles who was the perfect choice for this difficult and crucial assignment."

Eduardo1Dec 3, 2010

Hey great idea Mr Bowel & Simpson, since you do not rely at all on Social Security, why not cut it ALTOGETHER. Lets have those seniors who rely on it to live, die in the streets. And just to be sure it happens quickly, cut out medicare altogether also.

By the way, I did not see any recommendation about no money at all allotted for ILLEGALS. HOW COME?

djofraleighDec 2, 2010

The federal tax on a gallon of gas should match whatever the states charge, varying from state to state.

common_sense_plzDec 2, 2010

It's real easy for ole Erskins whom is wealthy to say cut back on Social Security, like I said he and the other fella are wealthy and do not rely on social security as their way of life,but there are millions out there that do,they have to live off social security, with it being a suppliment to their retirement. This equals a fixed income. My parents and in-laws have to watch every dollar they spend. My in-laws live on about 2,000 a month and roughly 1,200 of that goes for heating fuel, as they are elderly and cold, so they keep the heat high. The rest has to go towards medical bills, medication and food. The elderly has not seen a increase in social security benefits in 2 years going on 3. As far as my in-laws,if it were not for thier children, they would starve or freeze. So cutting Social Security is not the answer.

SARCASTICLESDec 2, 2010

WorlandDec 2, 2010

Looking at the 2009 budget, social programs were 62% of the federal budget. That's where the major cuts will have to come from. The DoD and the GWOT were another 22%. We'll have to cut there too. The Department of Education, in the government's own assessment, is a total waste of money. It should be completely dissolved, saving $46B alone.

ykmDec 2, 2010

Wayne most will never make the connect you have. Seems the federal government can always find a reason to borrow and spend but never to borrow and pay back. That 2 billion could have gone to S/S. to pay back the money they took. Our money.

wayneboydDec 2, 2010

Senator Burr, we will never see government spending reduced as long as your breath smell of Harry Reids backside, thanks for joining him in expanding government by 4000 new employees and a two billion dollars in a safe food act.

tamiya_starsDec 2, 2010

There was about 300 comments on this story last night... just wondering where are they????

whatusayDec 2, 2010

There is many times more fraud and abuse and potential savings in the "welfare" system. Why isn't cutting welfare mentioned in this study? And, why does our government give cell phones and free minutes to those on welfare?

whatusayDec 2, 2010

How about cutting welfare. Younger people are abusing the welfare system, including illegals. Welfare should be the first place to cut if this administration is serious about saving money. But, everyone knows that would take away from the democrats voting base. SS mainly affects the elderly.